In Pakistan, there is a growing need for demand management in several utilities that are regulated or operated by state-appointed personnel, a factor that has emerged as a major source of mismanagement and corruption in recent years. In recent years, the Pakistani public has been subjected to a number of scarce items on the market.
At present, the product that is causing much consternation amongst government circles as well as the general public is the dwindling supply of CNG for vehicles as well as gas supply to other critical sectors of the economy that include power, industrial and fertiliser sector. There is, however, little agreement amongst government ministries with respect to either the cause of the scarcity or indeed the prescription that would deal with the scarcity.
It is the considered opinion of the Ministry for Petroleum and Natural Resources that gas usage is not at its optimal level or, in other words, there is a need to shift scarce gas resources from its existing use as fuel in vehicles with few economic returns towards those sectors with greater rates of return, for example, power and fertiliser. It is the considered opinion of the Ministry for Water and Power that gas should be supplied mainly to the power sector to ensure minimal loadshedding and maximum economic activity as a consequence. And it is the considered opinion of the Ministry of Industries that gas must be used for fertiliser production as failure to do so would not only compromise farm output but also compel the government to import fertilisers thereby placing a further strain on our existing scarce foreign exchange reserves with a consequent negative impact on the country's precarious balance of payment (BoP) position.
The Ministry of Finance supports the Ministry of Petroleum and Natural Resources proposal to equate the price of gas with its caloric value and thereby ensure that the price of each fuel is linked to its caloric value that would ensure that a price differential between gas and petrol would not lead to the public favouring one fuel over another as is the case at present. In addition, the Ministry of Finance holds the Ministry of Water and Power responsible for the extent of loadshedding as it argues that there have been no sector reforms implemented as identified time and again by multilaterals and bilaterals. The Ministry of Water and Power lays the blame on government bodies that do not clear their bills and physically assault staff who visit the site with the objective of disconnecting electric supply. There is thus little unanimity of views between these four important ministries, all of which are headed by PPP loyalists.
It is the considered opinion of the general public that CNG use in vehicles, around 3.5 million in total, must be allowed to continue to ensure that the people have access to cheaper fuel that is domestically extracted. And it is the considered opinion of PPP leaders that until and unless CNG is allowed to the public at the present level valuable votes would be lost in the forthcoming general election.
And as if these markedly different views are not sufficient to guarantee the non-resolution of this issue there is yet another stakeholder throwing a spanner into the possibility of an agreement premised on sound economic logic: the cartel of CNG station owners who are resisting any move to slash their profit margins and what many believe are overstating their operating costs.
Who is a member of the CNG station owners' cartel? Rumour has it that several federal ministers and key politicians across the political divide own these stations either directly or indirectly through front men/women who may or may not be close family members. The Chief Justice of Pakistan also noted this in his observations while hearing the CNG case; and stated that the payment of a hefty bribe for the issuance of a licence was evidence of how lucrative a CNG station was.
By definition a cartel would raise the price of a product/service/utility by restricting supply thereby raking in windfall profits. In Pakistan, we have several cartels operating in several sub-sectors including sugar, cement and banks. Or in other words, cartels are not only found in products that normally operate under free market conditions in the rest of the world but also inexplicably in products like CNG which is solely supplied to the stations by the government at a price that had prior to the Supreme Court intervention guaranteed not only an enviable operating cost but also a windfall profit.
So what is the best way to deal with cartels? Pakistan in common with other countries of the world has a Competition Commission whose primary responsibility is to ensure that cartelization does not take place in any sector. Its success has been rather limited, not quite because the CCP does not take notice of cartelization in various sectors but because Pakistani cartels have tremendous political clout which they do not hesitate to exercise. The inability of the government and the CCP to effectively deal with cartels, especially with respect to items of daily use, has accounted for the Supreme Court's interventions. Thus the decisions on pricing of say CNG and sugar.
The public has been highly supportive of SC verdicts as a decline in the price was ordered, however, the implementability of such decisions came into question with respect to sugar and in the CNG crisis wherein the suppliers withhold stocks and/or take strike action. Thus the solution lies in a more proactive and strengthened CCP that requires government support from all relevant enforcement departments.